Tesco's new chief: what the analysts say

Philip Clarke's appointment as the next chief executive of Tesco has been welcomed by City analysts, who believe the company will continue its recent success after Sir Terry Leahy departs.

Sam Hart of Charles Stanley

Clarke is something of an unknown quantity to investors, but given his already lengthy career at Tesco and success in developing the international business, we consider the appointment to be a good one. We expect his approach to be evolutionary and do not anticipate any radical departures from current strategy.

In the near and medium term, UK like-for-like sales growth is likely to remain subdued, reflecting the low level of food price inflation. Trading in international markets is expected to gradually improve as economic recovery slowly comes through. Long-term earnings growth prospects remain good, with international and Tesco Bank likely to be key drivers. Given our expectation that the group will deliver at least low double-digit growth in underlying earnings per share and dividends in each of the next three years, we consider the valuation attractive. The recommendation remains 'accumulate'.

Nick Bubb of Arden Partners

A bit out of the blue, but it had to happen sometime and it looks like a smooth succession. A lot of people wanted the job, but nobody should be disappointed and Phil Clarke was one of the frontrunners, even though his profile is low. Both Asda and Tesco will now be run by people called Clarke.

We don't think this is price sensitive for Tesco; they will grind on. The king is dead, long live the king?

Caroline Gulliver of Execution Noble

Phil is a worthy successor in our view. He is a Tesco man through and through having joined Tesco in 1974 and has been on the board for the past 12 years. Phil has led the expansion in Asia and Europe and comes across as very personable, talented and dedicated. So although Leahy is a loss for Tesco, we expect an orderly handover and Tesco's continued growth under Phil Clarke.

James Monro of S&P Equity Research

In our view, the shares have been oversold since end April, despite attractive fundamentals: we believe the company remains well placed to regain market share from imminent austerity measures, which are certain to impact consumer sentiment and spending, whilst also pushing its international presence. The news today, in our view, presents a decent buying opportunity for the stock. While the reaction should reverse almost immediately, strategy changes are unlikely, given the internal appointment, which we believe also points to the growing importance of international focus. We maintain our 'buy' recommendation.